Audit response cites Krause, Wefald

Release the final step in complex saga

New Kansas State president Kirk Schulz told the Kansas Board of Regents on Thursday former president Jon Wefald invested too much power in Bob Krause, shown here with football coach Bill Snyder, and provided inadequate oversight and supervision of him.

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Former Kansas State University president Jon Wefald invested too much power in vice president Bob Krause and provided inadequate oversight of his actions, said a university review of financial irregularities first identified in a June audit.

Release of that review to the Kansas Board of Regents by current K-State president Kirk Schulz on Thursday appeared to be the final step in the wide and complex saga involving secret compensation deals in K-State's athletic department and conflicts of interest in management of a business incubator program affiliated with the university.

"It was clear that there was an awful lot of power consolidated in too few people," Schulz told regents. "Over a history of time that probably led to some poor decisions."

A scathing audit released in June said Krause's wide sphere of influence created conflicts of interest and questionable financial practices in several areas of the university, including the athletic department, the KSU Foundation, and the school's academic fundraising entity.

A panel of K-State professors, alumni, other university officials and students reviewed that audit. On Thursday, it submitted to the regents a report containing recommendations to increase checks and balances, transparency and communication between various university entities.

Regents praised Schulz for his openness throughout the process and expressed a desire to see through implementation of the review's recommendations.

"It's one thing to say that these are the things that need to be changed to fix this situation," said regent Donna Shank. "But I would like to know at some point in time that those things have been done so we can truly put this behind us."

Schulz said many of the changes already have been adopted, and he agreed to provide an update on K-State's progress at the board's April meeting.

Krause, Wefald's top deputy, was at the center of much of the review's finding.

For instance, Krause received "overload" payments from 2003 to 2008 for his work with the athletic department, despite his devotion of time to a university-affiliated business incubator.

"It seems to make little sense to allow a full-time employee to decrease his commitment to the university in favor of another entity and then give that employee an overload payment to seemingly make up the difference," the review states.

The report noted the university has now set up numerous oversight levels at the athletic department. The department's board of directors is now required to review every compensation package, and K-State's chief financial officer reviews most of the department's financial transactions.

Krause' relationship to K-State's economic development entity also drew attention in the review. It faulted him for being a board member of the National Institute for Strategic Technology Acquisition and Commercialization while also sitting on the board of NutriJoy, a nutritional food and beverage company in which NISTAC invested. Wefald also was a shareholder in NutriJoy.

Schulz told regents that K-State presidents and members of their cabinet, which includes vice presidents like Krause, would no longer be allowed to sit on a board of, or invest in, any NISTAC start-up companies.

The review also noted K-State directly funds NISTAC through an annual $500,000 transfer of funds, which the review recommended the university examine.

"What's wrong with this entity that it can't support themselves?" regent Dan Lykins asked Schulz.

Schulz said most economic development groups need "a couple home runs" before they can fund themselves.

"We're close," he said.

Also on Thursday, K-State released the findings of an independent athletic department audit conducted by the firm Deloitte and Touche. The firm examined the 13 undocumented payments cited in the original audit and determined all had "documentation, approvals or were corroborated through inspection of related contracts."

Regent Gary Sherrer pointed out that K-State football coach Bill Snyder was cleared of any wrongdoing and said it was important to maintain a perspective on the issues.

"After all of this, auditing firms and attorneys and committees, there was no criminal activity, nobody did anything that you could find criminal," he said.

Regent Christine Downey-Schmidt praised Schulz for his "professional, direct, objective way you approached this as opposed to being defensive or evasive."

Speaking to Schulz, board chairwoman Jill Docking said she hoped the university and board could put the controversy behind them.

"I, like you, want us to move on," she said. "We've got lots of important things to do and lots of exciting things to do at K-State."

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"And on all the lips she found a weary desire for peace, the dread of officialdom with its nightmarish parody of administration without law, without security, and without justice." Joseph Conrad, Nostromo.

a first draft of history, what is the first draft of a newspaper article?

Just askin'...

"And on all the lips she found a weary desire for peace, the dread of officialdom with its nightmarish parody of administration without law, without security, and without justice." Joseph Conrad, Nostromo.